The National Living Wage

14th August 2015

The National Living Wage

Introduction

In the first Conservative Budget in 19 years, Chancellor George Osborne announced in July 2015 that businesses will be required to pay all workers aged 25 and over a National Living Wage of £7.20 per hour from April 2016 rising to £9.00 per hour from 2020.

What is the National Living Wage

The National Living Wage will in effect replace the National Minimum Wage for all workers aged 25 or over. It is expected to boost the income of around 6 million people. By 2020 someone aged 25 or over working 35 hours per week and currently earning the National Minimum Wage will see their wages increase by around £4,000 per annum.

For those aged under 25 the National Minimum Wage shall continue to apply, for example people aged 21 and under 25 will earn currently a minimum rate of £6.50 per hour, rising to £6.70 per hour in October 2015

How will Businesses fund this?

The Chancellor did say certain measures will be implemented to help businesses afford these new changes. Corporation Tax is being cut from 20% to 18% by 2020. Employers will be able to reduce National Insurance Contributions for employees by 50% up to £3,000.Good news or bad news?

George Osborne predicts that 1.1 million jobs will be created as part of his Budget overall, outweighing any losses caused by the National Living Wage. Some agencies have predicted that around 60,000 jobs could go as a result of the National Living Wage.

There is indeed a real fear for those aged 25 and over that firms will look to recruit more people under the age of 25 in order to avoid paying the National Living Wage by only having to pay the lesser rate of the National Minimum Wage.

Daven Naghen, head of our employment team commented as follows:-

“There is already a National Living Wage (£9.15 per hour for London and £7.85 per hour elsewhere) which is not compulsory. However the compulsory National Living Wage would provide an increased cost for businesses and it remains to be seen whether this increased cost will be abated by cuts in Corporation Tax and the increase in employment allowances for businesses. 25’s and over may think they are getting a big pay rise, but they may well be at an increased risk of losing their job. Only time will tell if the National Living Wage is going to be successful or not.”

If you require advice about the National Living Wage, or any other employment issue (whether you are an employer or a worker) then please contact Daven on 01775 722261 or email daven.naghen@maplessolicitors.comor visit our offices or arrange an appointment at our offices of 23 New Road, Spalding, Lincolnshire, PE11 1DH.

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